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AU / Accounting / ACCT 2210 / What are the characteristics of job order costing?

What are the characteristics of job order costing?

What are the characteristics of job order costing?

Description

School: Auburn University
Department: Accounting
Course: PRINCIPLES OF MANAGERIAL ACCOUNTING
Professor: Fetsch
Term: Fall 2016
Tags: Accounting
Cost: 25
Name: Chp 2 Notes
Description: Chp.2 Notes that contains material for our first exam.
Uploaded: 09/14/2017
5 Pages 94 Views 1 Unlocks
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Chapter 2 If you want to learn more check out How can we detect heterogeneity of cancer cells?

Job-order costing

Job-order costing overview Don't forget about the age old question of What is the difference between playoffs and finals?

  • Job-order costing system are used when
  • Many different products are produced each period
  • Products are manufactured to order
  • The unique nature of each order requires tracing or allocating costs to each job and maintaining cost records for each job

If you want to learn more check out How does natural selection act on an individual?

Job-order costing examples

  • Boeing (aircraft manufacturing)
  • Bechtel international (large scale construction)
  • Walt disney studios (movie production)

If you want to learn more check out What is the journal entry for paying dividends?

Measuring direct materials cost

  • Bill of materials: document that lists the quantity of each type of direct material needed to complete the unit of product
  • Materials requisition form: document that specifies the type and quantity of materials to be drawn from the store room and identifies the job that will be charged for the cost of the materials
  • Used to control the flow of materials into production and also for making journal entries in the accounting records

If you want to learn more check out Did irian invasions cause the fall of the harrapan empire?

Job-order costing - cost flow

Direct costs

If you want to learn more check out What is the hybridization of c2?

Direct materials

  • Job 1
  • Job 2
  • Job 3

Direct labor

  • Job 1
  • Job 2
  • Job 3

*charge direct material and direct labor to each job as work is performed

Job-order costing - cost flow 2

Direct costs

Direct materials

Direct labor

Indirect costs

MOH

  • Job 1
  • Job 2
  • Job 3

*MOH, including in direct materials and indirect labor, are all allocated to a jobs rather than directly traced to each job

Job cost sheet

  • Records the materials, labor, and manufacturing costs charged to that job

  • Inventory account
  • Raw materials
  • Wons in proces
  • Finished goods

RM                                WTP                FG

Beg Inv        DM                DM

Purchases        IM                DC

_________                        MOH

Finding INV

MOH

IM        Applied OH

IL        POHR x Actual

Depr        usage rate

Taxes

Measuring direct labor cost

  • Consists of labor charges that are easily traced to a particular job
  • Labor charges that cannot be easily traced to specific jobs are treated as part of MOH
  • Most companies rely on computerized systems to maintain employee time tickets
  • Time tickets: an hour-by-hour summary of the employee’s activities throughout the day

Computing predetermined overhead rates

  • Assigning MOH to a specific job is complicated by 3 circumstances
  • Manufacturing overdue is an indirect cost
  • “Consists of many diff types of costs ranging from the grease used in machines to the annual salary of the production manager. Some are variable overhead costs because they vary in direct proportion to change in the level of production (indirect materials, supplies, power) and some fixed overhead costs because they remain constant as the level of production fluctuates (hear, light, prop taxes, and insurance)

-         many companies have large amounts of fixed manufacturing overhead. Therefore, their total manufacturing costs tend to remain constant from 1 period to the next even through the # of units that they produce can fluctuate widely.

  •  Because of those circumstances, allocation is used to assign overhead costs to products
  • Allocation base: measure such as direct labor-hours (DCH) or machine-hours (MH) that is used to assign overhead costs to products and services
  • Most widely used allocation bases in manufacturing are DCH, direct labor cost, machine hours, and units of product.
  • Predetermined overhead rate: computed before the period begins using a 4-step process

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